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`Buyout Bait' In Biotech

December 04, 1994

Inside Wall Street

`BUYOUT BAIT' IN BIOTECH

Health-care stock maven Jim McCamant can say "I told you so" about Chiron and Synergen: All year, the editor of Medical Technology Stock Letter has argued that biotechs have been so beaten down as to be bargains. Well, Swiss drug-and-chemical giant Ciba-Geigy is buying nearly half of Chiron for a steep $2.1 billion. And Amgen is acquiring Synergen for $262 million.

"There are other Synergens around that are also buyout bait," says McCamant. He's betting on three: Celtrix Pharmaceuticals, Glycomed, and Xoma.

Celtrix (CTRX) is one of the most battered stocks in the group, having fallen in one day in late October by 63%, to 3. The reason was that its eye drug, Betakine, showed disappointing preliminary clinical test results. McCamant, however, remains optimistic about Betakine, which is also being tested for use against multiple sclerosis and ulcers. Most of all, says McCamant, Celtrix has two solid alliances: with biopharmaceutical company Genzyme for most ophthalmic uses of Betakine and with Green Cross of Japan for the development of SomatiKine for treatment of osteoporosis. Either of these partnerships, says McCamant, could lead to a merger.

Glycomed (GLYC), which has researched new drugs based on carbohydrates for treating cardiovascular and inflammatory diseases, "is definitely in discussions with ether companies for a buyout or merger," says McCamant. Its shares, now at 2, were at 25 in 1992, when Genentech began collaborating with it in research on inflammatory diseases. Genentech ended that alliance in September. But Glycomed's lab pact on the same drug with Sankyo of Japan, signed in July, is pulling in $10 million over three years, plus $5 million for each compound Glycomed develops. Glycomed is said to be talking to Sankyo about a merger.

Xoma (XOMA) is developing products to treat infectious diseases, immune-system disorders, and other complaints. McCamant thinks a bigger company is watching its clinical tests on various products, such as Neuprex for the treatment of acute lung infections and hemorrhagic shock.